Mortgage refinancing : consider refinancing your mortgage

consider refinancing your mortgage.

Whether you’re just exploring the idea or ready to start the process, this guide will help you make the right decisions for your Mortgage refinancing : consider refinancing your mortgage.

Mortgage refinancing

Mortgage refinancing

Start with your goals

There are lots of options when it comes to refinancing, so it helps to have a clear goal in mind.

Looking to shorten the term of your loan?

If you have a 30-year mortgage that you want to pay o  before retirement, for example, look for a 20-, 15-, or 10-year loan.

Need to set aside cash over the life of the advance?

Consider paying points to get a lower rate, especially if you plan to stay in your home for a number of years.

Need to lower your monthly payment?

Refinance to a lower interest rate and/or extend the term of your loan.

Have a movable rate contract (ARM) and are worried about rising loan costs?

Looking to get rid of private mortgage insurance (PMI)?

Refinance to reduce your loan-to- value ratio (the amount you want to borrow divided by the home’s current value).

Want to cash out some of the equity you’ve built up in your home?

Consider a cash-out re nance, where the new mortgage is for a larger amount than your current loan, and you get the di erence in cash.

Understand the costs and risks

There are costs and fees associated with refinancing.

Take them into account when looking at the overall costs and bene ts of renouncing.

Some mortgages have a pre-payment penalty.

Don’t automatically dismiss refinancing if your current mortgage has a pre-payment penalty, but factor it in when crunching the numbers.

Don’t overestimate the current value of your home

The appraised value could come in lower than anticipated, which will a ect the amount of equity you have in your home.

Mortgage loans front-load interest

For a typical 30 year mortgage, interest is front-loaded. This means during the earlier part of your mortgage term, the majority of your payments will go towards interest rather than principal.

However, you may consider refinancing to a shorter term to build equity faster.

If you’re planning to sell your home in the near future, it may not make sense to re nance.

Calculate how long it’ll take you to recover your refinancing costs and plan to stay in your home for at least that long.

Refinancing step-by-step

Get Your Current Credit Score and Calculate Your DTI

Mortgage refinancing : consider refinancing your mortgage.

Your credit score a ects the interest rates you’ll be o ered, so check your current credit report. If there are issues with your credit score, address them before talking with lenders.

Your debt- to-income ratio (DTI) is the monthly minimum payments on credit cards and other non-housing loans divided by your monthly income.

The lower the number the better, and most lenders usually look for a DTI of 36% or less.

Research Your Home’s Current Value

Lenders also look at is how much equity you have in your home.

Equity is determined based on the current value of the home, not the price you originally paid for it.

Review real estate websites for estimates of your home’s value and recent sale prices of comparable properties in the area.

You’ll likely need to get an appraisal done, but this early research helps you see where you stand.

Research Mortgage Rates

Mortgage refinancing : consider refinancing your mortgage

Are nance calculator will give you an idea of how much your new mortgage will cost.

Look at both the monthly payment and the total cost over the full term of the mortgage.

Then you’re ready to start getting quotes, but it’s important to understand how to navigate lender promotions – not all rates that are promoted may be available to you.

And while there are “no closing cost” options, such programs typically roll those costs into the interest rate.

Mortgage refinancing : consider refinancing your mortgage.